Single Touch Payroll or STP reporting is an Australian Taxation Office regulation that is applicable to all employers.
STP reporting became effective on 1 July 2018 for employers with 20 or more employees. From 1 July 2019, it became effective for employers with 19 employees or fewer.
The STP phase 2 was announced by the government in the 2019-2020 budget, with more reporting requirements to be applied from 1 January 2022.
What is STP?
Single Touch Payroll is an Australian Government initiative that aims to streamline employers’ reporting to government agencies.
With Single Touch Payroll (STP), an employer reports employees’ payroll information to the Australian Taxation Office (ATO) each time they pay the employees through STP-enabled software.
The following is included in the payroll information:
- Salaries and wages
- Superannuation liability information
- Pay-as-you-go (PAYG) withholding
All employers now should be Single Touch Payroll reporting and transitioned to STP Phase 2 reporting except if covered by deferral or exemption.
If you are new to employing, you must start reporting through STP Phase 2-enabled software once you start paying your employees to stay away from any penalties.
How does STP work?
Single Touch Payroll (STP) works by sending tax and super information from an STP-enabled payroll or accounting software to the Australian Taxation Office when you run your payroll.
Your pay cycle does not have to change. You will still run your payroll, pay your employees as usual and give them a payslip. You may also continue to pay your employees weekly, fortnightly or monthly.
The ATO will get a report through your STP-enabled software, and this report will include the information required by the ATO.
STP Phase 2
In the 2019-20 Budget, the Australian government announced that STP would be expanded to include additional information.
This expansion is called STP Phase 2, and it reduced the reporting burden for employers who have to report information about their employees to many government agencies. To know more about this, you can visit the official website of the ATO.
STP Phase 2 will include the capture of the following new fields:
- paid leave
- employment basis
- cessation details
- lump sums
- salary sacrifice
- country codes
You will also need to separately itemise the components that make up the gross amount, including bonuses, paid leave, directors fees, overtime, salary sacrifice and allowances.
There are several ways your Single Touch Payroll data can be reported to the ATO.
The STP Phase 2 has not changed the payments you have to report through Single Touch Payroll. However, how these amounts have to be reported changed. (You can find the full list of payments that have to be reported in STP phase 1 and 2 in STP employer reporting guidelines available on the ATO’s website.)
Since Super funds also report to the ATO, the ATO gets to know when an employer makes a super payment to their employees’ chosen or default fund. This ensures that the employers are paying the correct entitlements to the employees.
The ATO’s systems will match the Single Touch Payroll (STP) information to the employer and employee records.
In case your employees have a myGov account linked to the ATO online services, they can see their year-to-date tax and super information in the income statement. Their data is updated each time you, as an employer, report. For the majority of employers, this will be each payday.
You will have to finalise your STP data at the end of the financial year. It states that you are making a declaration of completing your reporting for the financial year.
When you finalise your data, your employee’s income statement in the ATO online service will be marked ‘Tax ready’. The employees or their registered agents can use the income statement for their tax return lodgment.
For the amounts reported through STP, you will not have to provide the employees’ payment summaries or provide the payment summary annual report to the ATO. However, for the amounts that you do not report through STP, you will have to provide payment summaries.
What do employers need to include in STP reports?
The following payments (along with the amounts withheld from them) need to be reported under Single Touch Payroll:
- Employee wages and salary
- Return-to-work payments
- Remuneration to the directors of a company
- Termination payments
- Parental leave payments
- Unused leave payments
- Payments to religious practitioners
- Payments to workers under some labour mobility programs
- Payments to office holders (like a member of the Defence force)
How does an employer count the employees for STP?
When it comes to calculating Single Touch Payroll (STP), every employer should count each employee regardless of whether they are full-time or not. As a result, an employer’s payroll reporting includes the following:
- Full-time employees
- Casual employees
- Part-time employees
- Any employee who is absent or on leave (unpaid or paid leave)
- Employees based overseas
- Closely held payees
It is worth noting that you do not have to report contractors’ pay through Single Touch Payroll.
Closely held payees – What are the STP requirements for them?
Closely held payees include a family member of a family business, shareholder, director or beneficiary of a trust or individuals receiving payments from an entity. But, you only have to report the amounts you pay to payees, which are subject to withholding and are also in scope for STP reporting.
When is STP reporting not required?
STP reporting can cease in certain circumstances, such as:
- You are no longer employing staff
- You close your business
- You change your business structure
- You are not making payments to employees for the remaining year
To know what you should be doing in these circumstances, visit the ATO’s website.
Disclaimer: The information on this website is for general purposes only and should not be relied upon for making legal or other decisions. The advice provided in this article is general in nature and is not subject to the personal financial situation and needs of any individual. Clear Tax tries to keep the information accurate and up-to-date; however, you should bear in mind with changing circumstances, the accuracy and reliability of the information will not necessarily remain the same. The information is by no means a substitute for financial advice.